[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1111 Introduced in Senate (IS)]

  1st Session
                                S. 1111

 To promote oil shale and tar sand development, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 24, 2005

  Mr. Hatch (for himself, Mr. Bennett, and Mr. Allard) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
 To promote oil shale and tar sand development, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Oil Shale and Tar 
Sand Development Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Declaration of policy.
Sec. 3. Definitions.
                  TITLE I--STRATEGIC FUELS DEVELOPMENT

Sec. 101. Strategic Fuels Task Force.
Sec. 102. Federal leasing program.
Sec. 103. Mineral Leasing Act amendments.
Sec. 104. Royalties.
Sec. 105. Office of Strategic Fuels.
Sec. 106. Cost-shared demonstration technologies.
Sec. 107. Technical assistance.
Sec. 108. State water rights.
Sec. 109. Authorization of appropriations.
 TITLE II--PROCUREMENT OF UNCONVENTIONAL FUELS BY DEPARTMENT OF DEFENSE

Sec. 201. Procurement of unconventional fuels by the Department of 
                            Defense.
                       TITLE III--TAX INCENTIVES

Sec. 301. Expensing of oil shale and oil sands technology expenditures.

SEC. 2. DECLARATION OF POLICY.

    Congress declares that it is the policy of the United States that--
            (1) domestic oil shale, tar sands, and other strategic 
        fuels--
                    (A) represent major long-term strategic energy 
                assets that complement the near-term assets of the 
                Strategic Petroleum Reserve; and
                    (B) should be developed on an accelerated basis;
            (2) development of those strategic fuels should be promoted 
        to meet the anticipated energy needs of the United States, 
        including civilian and military requirements;
            (3) those fuels are strategically important resources; and
            (4) the Federal Government and the private sector should 
        form a partnership to develop those strategic fuels for the 
        benefit of the people of the United States.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Office.--The term ``Office'' means the Office of 
        Strategic Fuels established by section 105(a).
            (2) Plan.--The term ``plan'' means the 5-year strategic 
        fuels development plan formulated under section 101(c).
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy, acting in consultation with the Task Force.
            (4) Strategic fuel.--The term ``strategic fuel'' means 
        domestic and military fuels derived from strategic hydrocarbon 
        resources to be managed and developed under the guidance and 
        authorities of the Strategic Petroleum Reserve as established 
        by the Energy Policy and Conservation Act (42 U.S.C. 6201 et 
        seq.).
            (5) Strategic hydrocarbon resources.--The term ``strategic 
        hydrocarbon resources'' means--
                    (A) oil;
                    (B) oil shale;
                    (C) tar sands (commonly referred to as ``oil 
                sands'');
                    (D) coal-derived liquids;
                    (E) gas-derived liquids; and
                    (F) any other hydrocarbon resource determined by 
                the Secretary.
            (6) Task force.--The term ``Task Force'' means the 
        Strategic Fuels Task Force established by section 101(a).

                  TITLE I--STRATEGIC FUELS DEVELOPMENT

SEC. 101. STRATEGIC FUELS TASK FORCE.

    (a) Establishment.--There is established a Strategic Fuels Task 
Force to develop a program to coordinate and accelerate the commercial 
development of strategic fuels in an integrated manner.
    (b) Composition.--The Task Force shall be composed of--
            (1) the Secretary (or the designee of the Secretary);
            (2) the Secretary of Defense (or the designee of the 
        Secretary of Defense);
            (3) the Secretary of the Interior (or the designee of the 
        Secretary of the Interior); and
            (4) representatives of industry, affected States and 
        communities, and other stakeholders, appointed by the 
        President.
    (c) Development of a 5-Year Plan.--
            (1) In general.--The Task Force shall direct the Office to 
        formulate a 5-year plan and coordinate with representatives of 
        the Department of Defense and the Department of the Interior to 
        promote the development of strategic fuels by industry.
            (2) Components.--In formulating the plan, the Task Force 
        shall--
                    (A) identify public actions that are required to 
                stimulate prudent development of strategic fuels by 
                industry;
                    (B) analyze the costs and benefits of those 
                actions;
                    (C) make recommendations concerning specific 
                actions that should be taken to stimulate prudent 
                development of strategic fuels by industry, including 
                economic, investment, tax, technology, research and 
                development, infrastructure, environmental, education, 
                and socio-economic actions;
                    (D) provide notice and opportunity for public 
                comment on the plan;
                    (E) identify strategic fuel technologies that--
                            (i) are ready for pilot plant and semiworks 
                        development; and
                            (ii) have a high probability of leading to 
                        advanced technology for first- or second-
                        generation commercial production; and
                    (F) assess the availability of water from the Green 
                River Formation to meet the needs of the strategic 
                fuels industry.
            (3) Reports.--Not later than 180 days after the date of 
        enactment of this Act, the Task Force shall submit to the 
        President and Congress a report that describes the analysis and 
        recommendations of the Task Force for the plan.

SEC. 102. FEDERAL LEASING PROGRAM.

    (a) In General.--As soon as practicable after the date of enactment 
of this Act, the Secretary of the Interior, acting through the Bureau 
of Land Management, shall develop, implement, and manage comprehensive 
leasing programs for strategic fuels on Federal land that address all 
stages of the leasing process from research and development to full 
commercial leasing.
    (b) Administration.--In carrying out the leasing programs, the 
Secretary of the Interior shall--
            (1) ensure environmentally sound and efficient development 
        of strategic fuels;
            (2) permit leasing beginning not later than the date that 
        is 18 months after the date of enactment of this Act;
            (3) in consultation with industry and the States of Utah, 
        Wyoming, and Colorado, define lease blocks that--
                    (A) meet requirements of industry;
                    (B) facilitate the efficient development of 
                strategic fuels; and
                    (C) are sufficient in size for development for a 
                commercial operation consistent with the Mineral 
                Leasing Act (30 U.S.C. 181 et seq.); and
            (4) as appropriate, provide for exchanges of Federal land 
        for such State or private land as is necessary to achieve 
        responsible leasing and development.

SEC. 103. MINERAL LEASING ACT AMENDMENTS.

    Section 21 of the Mineral Leasing Act (30 U.S.C. 241) is amended--
            (1) in subsection (a)--
                    (A) by designating the first, second, and third 
                sentences as paragraphs (1), (2), and (3), 
                respectively;
                    (B) in paragraph (3) (as designated by paragraph 
                (1))--
                            (i) by striking ``rate of 50 cents per 
                        acre'' and inserting ``rate of $2.00 per 
                        acre''; and
                            (ii) in the last proviso--
                                    (I) by striking ``That not more 
                                than one lease shall be granted under 
                                this section to any'' and inserting 
                                ``That no'';
                                    (II) by striking ``except that with 
                                respect to leases for'' and inserting 
                                ``shall acquire or hold more than 
                                50,000 acres of oil shale leases in any 
                                1 State. For''; and
                    (C) by adding at the end the following:
            ``(4) Research and development.--For a lease issued for 
        research and development activities, the lessee shall be 
        entitled to a preference right to lease additional lands to a 
        total acreage not to exceed 5,120 acres to develop commercial 
        production facilities, if the lessee submits an application and 
        provides evidence, and the Secretary agrees, that the lessee 
        has developed technology that warrants a commercial lease.'';
            (2) by redesignating subsection (d) as subsection (e);
            (3) by redesignating the second subsection (c) as 
        subsection (d); and
            (4) in subsection (e)(1) (as redesignated by paragraph 
        (2)), by striking ``subsection (c)'' and inserting ``subsection 
        (d)''.

SEC. 104. ROYALTIES.

    Section 35 of the Mineral Leasing Act (30 U.S.C. 191) is amended by 
adding at the end the following:
    ``(c)(1) Except as provided in paragraph (2) and notwithstanding 
any other provision of this Act, any royalty otherwise accruing to the 
United States under any lease for the extraction of a strategic fuel 
(as defined in section 3 of the Oil Shale and Tar Sand Development Act 
of 2005) on Federal land shall be reduced by--
            ``(A) 50 percent if NYMEX WTI oil $22.00-23.99 a barrel on 
        the date on which the strategic fuel is sold;
            ``(B) 40 percent if NYMEX WTI oil is $24.00-25.99 a barrel 
        on the date on which the strategic fuel is sold;
            ``(C) 30 percent if NYMEX WTI oil is $26.00-27.99 a barrel 
        on the date on which the strategic fuel is sold;
            ``(D) 20 percent if NYMEX WTI oil is $28.00-29.99 a barrel 
        on the date on which the strategic fuel is sold; and
            ``(E) 10 percent if NYMEX WTI oil is $30.00-31.99 a barrel 
        on the date on which the strategic fuel is sold.
    ``(2) The reduction in royalty provided under paragraph (1) shall 
terminate on the date that the project for the extraction of the 
strategic fuel reaches payback, as determined by the Secretary of the 
Interior (in consultation with the Secretary of Energy).

SEC. 105. OFFICE OF STRATEGIC FUELS.

    (a) Establishment.--There is established, in the Office of Naval 
Petroleum and Oil Shale Reserves, within the Office of the Deputy 
Assistant Secretary for Petroleum Reserves of the Department of Energy, 
the Office of Strategic Fuels, to ensure that strategic fuels are 
developed as strategic resources of national importance.
    (b) Purposes.--The purposes of the Office are--
            (1) to coordinate the creation and implementation of a 
        commercial strategic fuel development program for the United 
        States;
            (2) to evaluate the strategic importance of unconventional 
        sources of strategic fuels to the security of the United 
        States; and
            (3) to promote and coordinate Federal Government actions 
        that facilitate the development of strategic fuels in order to 
        effectively address the energy supply needs of the United 
        States.
    (c) Duties.--The Office shall--
            (1) identify, assess, and recommend appropriate actions of 
        the Federal Government required to assist in the development 
        and manufacturing of strategic fuels;
            (2) coordinate and facilitate appropriate relationships 
        between private industry and the Federal Government to promote 
        sufficient and timely private investment to commercialize 
        strategic fuels for domestic and military use; and
            (3) facilitate a partnership with Alberta, Canada, for 
        purposes of sharing information relating to the development and 
        manufacturing of strategic fuels.
    (d) Consultation and Coordination.--In carrying out subsection (c), 
the Office shall--
            (1) work closely with the Task Force; and
            (2) establish an advisory group composed of the various 
        stakeholders involved in the development of strategic fuels, 
        including State and local representatives, private industry, 
        and other affected communities.
    (e) Annual Reports.--Not later than 180 days after the date of 
enactment of this Act and annually thereafter, the Office shall submit 
to Congress a report describing the activities and recommendations of 
the Office.

SEC. 106. COST-SHARED DEMONSTRATION TECHNOLOGIES.

    (a) Identification.--The Secretary shall identify technologies for 
the development of strategic fuels that--
            (1) are ready for demonstration at a commercially-
        representative scale; and
            (2) have a high probability of leading to commercial 
        production.
    (b) Assistance.--For each technology identified under subsection 
(a), the Secretary may provide--
            (1) technical assistance;
            (2) assistance in meeting environmental and regulatory 
        requirements; and
            (3) cost-sharing assistance through the payment of a 
        Federal share of not to exceed 49 percent (as determined by the 
        Secretary) of the capital and operating costs of the expanded 
        project, including environmental controls.

SEC. 107. TECHNICAL ASSISTANCE.

    (a) In General.--The Secretary shall provide technical assistance 
to private industry for the purpose of overcoming technical challenges 
to the development of advancement of strategic fuels technologies for 
application in the United States.
    (b) Administration.--
            (1) In general.--The Secretary may provide technical 
        assistance under this section on a fee-for-service or cost-
        shared basis through individual agreements, cooperative 
        research and development agreements, partnerships, or other 
        approaches.
            (2) Federal share.--The Federal share of the cost of 
        activities assisted under this section shall be not less than 
        25 percent, as determined by the Secretary.

SEC. 108. STATE WATER RIGHTS.

    Nothing in this title impairs or in any manner affects any right or 
jurisdiction of the States with respect to the waters (including 
boundary waters) of the States.

SEC. 109. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as are necessary 
to carry out this title.

 TITLE II--PROCUREMENT OF UNCONVENTIONAL FUELS BY DEPARTMENT OF DEFENSE

SEC. 201. PROCUREMENT OF UNCONVENTIONAL FUELS BY THE DEPARTMENT OF 
              DEFENSE.

    (a) In General.--Chapter 141 of title 10, United States Code, is 
amended by inserting after section 2398 the following new section:
``Sec. 2398a. Procurement of fuels derived from coal, oil shale, and 
              tar sands
    ``(a) Utilization of Fuels to Meet Department of Defense Needs.--
The Secretary of Defense shall develop a strategy to utilize fuels 
produced from coal, oil shale, or tar (oil) sands (commonly referred to 
as `unconventional fuels') that are either extracted by mining or in-
situ methods and refined in the United States in order to assist in 
meeting the fuel requirements of the Department of Defense.
    ``(b) Authority to Procure.--The Secretary of Defense may enter 
into one or more contracts or other agreements to procure a fuel 
described in that subsection to meet one or more fuel requirements of 
the Department of Defense. Any such contract or agreement shall meet 
the requirements of this section.
    ``(c) Clean Fuel Requirements.--A fuel may be procured under 
subsection (b) only if such fuel meets such standards for clean fuels 
produced from domestic sources as the Secretary of Defense shall 
establish for purposes of this section in consultation with the Office 
of Strategic Fuel Analysis of the Department of Energy.
    ``(d) Multiyear Contract Authority.--Subject to applicable 
provisions of appropriations Acts, any contract or other agreement for 
the procurement of fuel under subsection (b) may be for one or more 
years at the election of the Secretary of Defense.
    ``(e) Price Limitations.--
            ``(1) Each contract or other agreement for the procurement 
        of fuel under subsection (b) shall set forth the maximum price 
        and minimum price to be paid for a unit of fuel under such 
        contract or agreement, which prices shall be established by the 
        Secretary of Defense at the time of entry into such contract or 
        agreement.
            ``(2) In establishing under paragraph (1) the maximum price 
        and minimum price to be paid for fuel under a contract or 
        agreement under subsection (b), the Secretary shall take into 
        account applicable information on world oil markets from the 
        Department of Energy, including global prices for crude oil, 
        costs of production of such fuel from both conventional and 
        unconventional sources, and returns on investment in the 
        production of such fuel.
    ``(f) Fuel Source Analysis.--In order to facilitate the procurement 
by the Department of Defense of fuels under subsection (b), the 
Secretary of Defense may carry out a comprehensive assessment of 
current and potential locations in the United States for the supply of 
fuels described in subsection (a) to the Department.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by inserting after the item relating to section 
2398 the following new item:

``2398a. Procurement of fuels derived from coal, oil shale, and tar 
                            sands.''.

                       TITLE III--TAX INCENTIVES

SEC. 301. EXPENSING OF OIL SHALE AND OIL SANDS TECHNOLOGY EXPENDITURES.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to itemized deductions for 
individuals and corporations) is amended by inserting after section 190 
the following new section:

``SEC. 191. OIL SHALE AND OIL SANDS TECHNOLOGY EXPENDITURES.

    ``(a) Treatment of Expenditures.--
            (1) In general.--A taxpayer may elect to treat any 
        qualified oil shale and oil sands technology expenditure which 
        is paid or incurred by the taxpayer as an expense which is not 
chargeable to capital account. Any expenditure which is so treated 
shall be allowed as a deduction.
            ``(2) Election.--An election under paragraph (1) shall be 
        made at such time and in such manner as the Secretary may 
        prescribe by regulation.
    ``(b) Qualified Oil Shale and Oil Sands Technology Expenditures.--
For purposes of this section, the term `qualified oil shale and oil 
sands technology expenditure' means, with respect to any taxable year, 
any direct or indirect costs incurred and properly taken into account 
with respect to the purchase or installation of equipment and 
facilities (including any upgrades thereto) relating to in-situ 
treatment (or processing), mining, conversion, recovery, and upgrading 
of oil shale or oil sands located in the United States for the purpose 
of creating fuels, fuels feedstocks, or other manufactured products. 
Such term shall include so much of the purchase price paid by the 
lessor or equipment and facilities subject to a lease described in 
subsection (c)(2) as is attributable to expenditures incurred by the 
lessee which would otherwise be described in the preceding sentence.
    ``(c) When Expenditures Taken Into Account.--For purposes of this 
section--
            ``(1) In general.--Qualified oil shale and oil sands 
        technology expenditures shall be taken into account under this 
        section only with respect to equipment and facilities--
                    ``(A) the original use of which commences with the 
                taxpayer, and
                    ``(B) which are placed in service, after the date 
                of the enactment of this Act.
            ``(2) Sale-leasebacks.--For purposes of paragraph (1), if 
        property--
                    ``(A) is originally placed in service after the 
                date of the enactment of this Act by any person, and
                    ``(B) sold and leased back by such person within 3 
                months after the date such property was originally 
                placed in service, such property shall be treated as 
                originally placed in service not earlier than the date 
                on which such property is used under the leaseback 
                referred to in clause (ii).
    ``(d) Special Rules.--
            ``(1) Property used outside the united states, etc., not 
        qualified.--No expenditures shall be taken into account under 
        subsection (a)(1) with respect to the portion of the cost of 
        any property referred to in section 50(b) or with respect to 
        the portion of the cost of any property specified in an 
        election under section 179.
            ``(2) Basis reduction.--
                    ``(A) In general.--For purposes of this title, the 
                basis of any property shall be reduced by the portion 
                of the cost of such property taken into account under 
                subsection (a)(1).
                    ``(B) Ordinary income recapture.--For purposes of 
                section 1245, the amount of the deduction allowable 
                under subsection (a)(1) with respect to any property 
                which is of a character subject to the allowance for 
                depreciation shall be treated as a deduction allowed 
                for depreciation under section 167.
            ``(3) Coordination with section 38.--No credit shall be 
        allowed under section 38 with respect to any amount for which a 
        deduction is allowed under subsection (a)(1).''.
    (b) Conforming Amendments.--
            (1) Section 263(a)(1) of the Internal Revenue Code of 1986 
        (relating to capital expenditures) is amended by striking 
        ``or'' at the end of subparagraph (H), by striking the period 
        at the end of subparagraph (I) and inserting ``, or'', and by 
        adding at the end the following new subparagraph:
                    ``(J) expenditures for which a deduction is allowed 
                under section 191.''.
            (2) Section 1016(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (30), by striking the period at 
        the end of paragraph (31) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(32) to the extent provided in section 191(d)(2).''.
            (3) The table of sections for part VI of subchapter A of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 190 the following new item:

Sec. 191. Oil shale and oil sands technology expenditures.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures incurred in taxable years beginning after 
December 31, 2005.
                                 <all>